Most opportunely there is given to the English readers this
year, under the most authoritative auspices, a translation of the great
textbook of modern socialism. It is a portion only of the complete work
of Karl Marx which is now published; but it is the portion on which his
fame rests, and which has served as the intellectual arsenal of the
Socialist movement. On the Continent we are told, Marx's Capital
is often called "the Bible of the Working Class". This arrogant title
so characteristic of the temper and pretensions of Marx and his school
does not appear to have any great warrant in fact. But the work is
eminently fitted to become the Bible of the revolutionary socialists.
In its defects, as well as in its strongest qualities, it may be taken
as the type of the revolutionary mode of thought. We find in it great
literary power, together with surprising scientific weakness, keen and
wide observation of facts disfigured by the grossest partiality and
unfairness, un bounded egotism and contempt for opponents, coupled with
a genuine sympathy for the suffering and oppressed. The man who has
once satisfied himself as to the value of Marx's Capital
need trouble himself no further with theoretic socialism. He can
reserve his energies for the more useful task of working out practical
reforms. The work abounds in repetitions, and then is not very
philosophically arranged; but, speaking roughly, we can distinguish in
the work three principal enquiries. We have first a theory of value, on
which is founded a theory of profit and of the accumulation of capital.
Then we have a description of the state of the working classes under
the system of capitalistic, or large-scale industry. And, underlying
the whole work, but more particularly in its closing at chapters, we
have a doctrine of social transformation. It will be convenient, as far
as possible, to deal with each of these enquiries separately.

If it is difficult to treat Marxist theory of value at once
briefly and fairly, the fault is not the critic. The theory will not
bear the searching test of condensation. Its argument is only saved
from flagrant absurdities by innumerable inconsistencies, masked under
a cloud of words and expressed in a pseudo-metaphysical terminology.
Marx is very fond of quoting Sir James Stuart. We never take up Marx's
theory of value without being reminded of a quaint passage in that
meritorious writer"Q. Why does the doctrine of money appear so
intricate? Ans. Because it is perplexed by jargon." Dropping the
jargon, the essence of the theory is as follows:- Things which are the
subject of exchange and valuation must have some common elements,
otherwise they would not be commensurable. That element cannot be found
in their uses, which are as diverse as the things themselves. It is,
therefore, due to the labour which they embody-abstract social labour.
Labour, therefore, alone creates value. Again in exchange, the values
which change hands are always equal. How, then, can exchange give rise
to profit? It could not do so but for the fact that one of the things
bought and sold - namely labour - is of such a character that though it
is always bought at the value of its cost of subsistence, it is able to
produce more, sometimes much more, then this cost. Thus we have a
margin, out of which, in various ways specified, "capital" extracts a
profit, which is a robbery of labour and a source of accumulation.
Further it is clearly implied that the reward of labour having nothing
to do with its a efficiency or the advance of the industrial arts, but
depending upon the cost of its subsistence, Labour has no share in the
progress of society, but is doomed to perpetual penury. This is the
famous "iron law" of capitalist it production, borrowed without
acknowledgement by [from? SP] Lassalle, and better known in connection
with his brilliant propaganda.

It is high time that it should be distinctly stated that this
"theory" is nothing more than an elaborate attempt to disguise a petitio
principii [assuming the conclusion - SP]. The first
proposition that value is only congealed labour is partly based upon a
misunderstanding of Ricardo, which ought to have been impossible to a
man of Marx's general mental power; and partly rests on the syllogism
stated above, an argument which has been refuté sans replique
[indisputably refuted - SP] by the Rev. P.H. Wicksteed with unnecessary
patience in Today October 1884. Utilities possess
value, when they are scarce, no matter what may be the cause or cure of
the scarcity. In this all economists agree, although they have followed
different methods in their analysis of scarcity. Not a single
proposition of this analysis, as it may be found in the works of
writers like Jevons[2], Mr Marshall[3], and Dr Sidgwick[4], is shaken by Marxist criticism.
His theory of exchange profit is childishly weak. It is obvious that
the profit on exchange, or the dealers commission, is included in the
equal values exchanged. The service of the dealer is counted by all
economists as one of the elements in expense of production. Marx might
retort that the dealer renders no service. That is Marx's opinion.
Theories have to investigate facts. The fact is that the dealer
services are paid for, and form part of price. As to the origin of the
"profit" (Marx always jumbles together employer and capitalist) a
sufficient explanation of one element in it is that the community finds
it worthwhile to pay interest on capital. The other element is the
result of the system, believed to be socially advantageous, by which
industry is directed by private individuals. Marx disagrees with the
accepted view on both points. But in his theory he should have dealt
with facts. And it is surprising when we come to the question of
opinion how little he has contributed in the way of substantial
argument towards refuting the generally received views. On the really
important issue, whether interest is or is not justifiable, Marx has
nothing more solid to offer than rhetorical sneers at the phrase of
Senior, according to which interest is a reward abstinence.

Marx's famous "iron law" rests upon an equivocation of the
most palpable kind. The economists had pointed out that under the
influence of competition there was a tendency for wages to adjust
themselves to what they called the customary standard of comfort.
Ricardo, whose theory often suffers from undue generalisation of some
of the salient facts of his time, sometimes substituted for this
expression the term necessaries of life, which represented the standard
of comfort most common in his day. Marx erects an imaginary law upon
the confusion. So thoroughly ambiguous is his language that the very
same term Gewohnheits-mussigen, which is
translated by necessaires in the French edition,
appears as "customary". In the English edition(p.304) though a few
lines further on that phrase again changes to "necessaries of life".
Such ambiguity on an absolutely vital matter is poor work, from a
scientific point of view; but the political convenience of this is
obvious. When faced by the stubborn facts that the position of the
working classes has steadily improved, and that they have made vast
savings, Marx falls back on the orthodox standard-of-comfort doctrine.
When he wishes to denounce capitalists, we hear no more of the standard
of comfort. Labour is doomed by inexorable law to work for bare
subsistence.

It is plain that if we start from the proposition that nothing
but Labour occasions value, less than 800 pages of dialectic and
denunciation will easily bring us to the conclusion that profit is
robbery, or indeed to any other conclusion we want, according as we
define labour in the sense of personal service or in the
Trafalgar-square sense of manual exertion. Marx merely runs through the
gamut of the various meanings of labour according as he desires to
harmonise his theory with the facts, or with his notion of what the
facts ought to be. There is only one of the much despised bourgeois
economists whose logical weaknesses at all comparable to that of Marx.
Bastiat, like Marx, had assumed a faulty definition of value the main
propositions be he desired to prove. But Bastiat was a Frenchman, and
his failure was so charmingly lucid that it will always play a useful
part in economic instruction. No one will say this of the come across
ambiguities of Karl Marx.

[1]Capital, A Critical
Analysis of Capitalist Production by Karl Marx. Translated
from the third German edition by Samuel Moore and Edward Aveling and
edited by Frederick Engels (London, Swan Sonnenschein, Lowery and Co.,
Paternoster Square. 1887)

[2] [W. Stanley Jevons - the economist
famous for proving that sunspots are responsible for crises. He also
developed a marginal utility theory of value in his Theory
of Political Economy, first published in 1871, where he
asserted that "labour is never the cause of value". When invited to
defend his theory of value publicly against Hyndman's criticism, he
famously funked the opportunity. He was also a racist: "Persons of an
energetic disposition feel labour less painful than they
otherwise would, and, if they happen to be endowed with various and
acute sensibilities, their desire of further acquisition never ceases.
A man of lower race, a negro for instance, enjoys possession less, and
loathes labour more; his exertions, therefore, soon stop. A poor savage
would be content to gather the almost gratuitous fruits of nature, if
they were sufficient to give sustenance; it is only physical want that
drives him to exertion." Theory of Political Economy,
(5th edition, New York, 1965), pp182-183. SP]

[3] [Alfred Marshall, subsequently
Professor Economics at Cambridge University. His Principles
of Economics used to be the 'Bible', as Foxwell might put
it, of neo-classical vulgar economy. It is an astonishing work, oozing
race theory from every pore and riddled with anxiety about
'degeneration' of the human race. Eg. "on the Pacific Slope, there were
at one time just grounds for fearing that all but highly skilled work
would be left to the Chinese; and that the white men would live in an
artificial way in which a family became a great expense. In this case
Chinese lives would have been substituted for American, and the average
quality of the human race would have been lowered."(Principles,
8th edition, IV.V.23n73). Or, "conquering races
generally incorporated the women of the conquered; they often carried
with them many slaves of both sexes during their migrations, and slaves
were less likely than freemen to be killed in battle or to adopt a
monastic life. In consequence nearly every race had much servile, that
is mixed blood in it: and as the share of servile blood was largest in
the industrial classes, a race history of industrial habits seems
impossible." (Ibid,.IV.V.7 n65) We also meet the clever but cunning and
slippery money-dealing Jew: Ricardo's "aversion to inductions and his
delight in abstract reasonings are due, not to his English education,
but, as Bagehot points out, to his Semitic origin. Nearly every branch
of the Semitic race has had some special genius for dealing with
abstractions, and several of them have had a bias towards the abstract
calculations connected with the trade of money dealing, and its modern
developments; and Ricardo's power of threading his way without slip
through intricate paths to new and unexpected results has never been
surpassed. But it is difficult even[!!! SP] for an Englishman to follow
his track" (Appendix B.19 n44). It is completely fitting that this book
should have served as the economics textbook of the English ruling
class during their period of imperial domination. Perish the thought
that the theories of Marx (who was, after all, of 'the Semitic race')
should be superior to this member of the master-race! SP.]

[4] [Sidgwick, too, had concerns for
the relationship between 'inferior' and 'superior' races, though he
seems to have been more optimistic than Marshall about the influence
good 'tutelage' could have on 'inferior races'. Marshall described him
as his "spiritual mother and father." SP]